Mainstream economists dissing people that want to rethink economics

There’s a lot of commenting on the blog now, after yours truly put up a post where Cambridge economist Pontus Rendahl in an interview compared heterodox economics to ‘creationism’ and ‘alternative medicine,’ and totally dissed students that want to see the economics curriculum moving in a more pluralist direction.
Sad to say, Rendahl is not the only mainstream economist having monumental problems when trying to argue with people challenging the ruling orthodoxy.

A couple of years ago Paul Krugman felt a similar urge to defend mainstream neoclassical economics against the critique from students asking for more relevance, realism and pluralism in the teaching of economics. According to Krugman, the students and people like yours truly are wrong in blaming mainstream economics for not being relevant and not being able to foresee crises. To Krugman there is nothing wrong with ‘standard theory’ and ‘economics textbooks.’ If only policy makers and economists stick to ‘standard economic analysis’ everything would be just fine.

I’ll be dipped! If there’s anything the last couple of years have shown us, it is that economists have gone astray. Krugman’s ‘standard theory’ — mainstream neoclassical economics – has contributed to causing todays’s economic crisis rather than to solving it. Reading Krugman, I guess a lot of the young economics students that today are looking for alternatives to mainstream neoclassical theory are deeply disappointed. Rightly so. But — although Krugman, especially on his blog, certainly tries to present himself as a kind of radical and anti-establishment economics guy — when it really counts, he shows what he is — a die-hard teflon-coated mainstream neoclassical economist.

Perhaps this becomes less perplexing to grasp when one considers what Krugman said in a speech (emphasis added) in 1996:

I like to think that I am more open-minded about alternative approaches to economics than most, but I am basically a maximization-and-equilibrium kind of guy. Indeed, I am quite fanatical about defending the relevance of standard economic models in many situations …

Personally, I consider myself a proud neoclassicist. By this I clearly don’t mean that I believe in perfect competition all the way. What I mean is that I prefer, when I can, to make sense of the world using models in which individuals maximize and the interaction of these individuals can be summarized by some concept of equilibrium … I have seen the propensity of those who try to do economics without those organizing devices to produce sheer nonsense when they imagine they are freeing themselves from some confining orthodoxy.

So now all young economics students that want to see a real change in economics and the way it’s taught — now you know where you have people like Rendahl and Krugman. If you really want something other than the same old mainstream neoclassical catechism, if you really don’t want to be force-fed with mainstream neoclassical theories and models, you have to look elsewhere.

I completely stopped ascribing any credibility to Krugman’s pronouncements a few years ago.

The determining factor was his “fanatical” insistence on “defending the relevance of his favourite economic model in many and sundry situations”: IS-LM.

The IS-LM model was developed some 70 years ago, and has become one of those “confining orthodoxies” much touted by Krugman.

The entire statistical apparatus to collect information on GDP, interest rates, unemployment, etc, has been in place for the same amount of time.

All the elements are available to determine an empirical IS-LM curve for all major economies.

However, the only thing that Krugman (and others) ever shows regarding IS-LM are those abstract graphs showing unrealistically straight curves, entirely devoid of scales, and based on no real-world data whatsoever.

A well-established model, all the necessary data, but never, ever matching both empirically? To me, this means that he is a charlatan.

The fundamental problem with mainstream economists is that they believe that free demand markets are the best way to arise at a consensus on prices. Some limited demand markets are a low-cost way to arrive at a price consensus but they prove to be extraordinarily expensive for most markets. Lower cost methods can be found by using “swarm intelligence” and using meta-heuristic search techniques to arrive at a consensus. Price setting is one instance of this general problem. See https://kevinrosscox.me/2016/10/12/making-decisions-by-consensus/ for examples including pricing.

I worked as an expert witness in utility and environmental regulatory cases for 30 years. The work I did included lots of different concerns. Some are what I guess is often labeled economic analysis. I never really cared. I focused on getting the results right. A favorite part of my work was embarrassing (dissing) professional economist witnesses. It was great fun. I never lost. I always put this standard Q and A in my testimony. Q: Dr. ________ please provide a list of 5 positive contributions economists have made toward solving major social problems? No matter what the answer my attorney and I always showed the answers were non-responsive and/or untrue. It’s this work that convinced me that economics is a useless and unnecessary area of work. My recommendation: dump it. Note: my PhDs are in history and anthropology.

“economics is a useless and unnecessary area of work. My recommendation: dump it.”

Agree. There have been some valuable contributions to knowledge made by economists but most economists don’t even know about them. Essentially, those contributions have shown that the conventional wisdom of economics is wrong… fantastically wrong.

I am first offended by Rendahl’s insult to alternative medicine.
A healthy 81, I have used mainly alternative medicine for more than 40 years.
Otherwise, regarding economics, I regard Neoclassical (The Orthodoxy) as a cult, deserving no respect as a site within the “free marketplace of ideas”.
Current economics I refer to as Plutonomics, a tag I think I got from some of these posts.
I love the REW blog. Keep it up; perhaps someday we’ll “win” and economics can serve real people in a real world within a healthy ecosystem.
I’ve heard that the History of Economic Thought, which I was well-taught in a required year-long undergrad course long ago, has been dropped from many university curricula. Doing a small and select sample, I find this to be true, dropped or marginalized, never required. Anyone know about this and why? Without a framework of philosophical history it is difficult to know economics in context, and perhaps more difficult to craft a non-Plutonomics alternative.

I had the opportunity to hear and talk with Amartya Sen a few years ago. I also just recently had the chance to attend a seminar with George Stiglitz. Stigliitz is smart and can talk economics well. Sen on the other hand is smart and can talk people, relationships, and history well. For me the difference is monumental.

“Speaking of communication, in my writing I distinguish between a rant and an essay. A rant is purely self-expression, a release of emotional energy. An essay has structure, involves some thought, and above all seeks to communicate something to someone. It is less blatantly egotistical. I can rant with the best of them. I prefer to communicate”.

Says Ken: “It’s this work that convinced me that economics is a useless and unnecessary area of work. My recommendation: dump it.”

The misunderstanding of economics means its misuse cannot be recognised and corrected, which misuse is having potentially fatal effects on our world and its inhabitants. With our only house falling down, our householders may reassure others by papering over the cracks and themself by moving into rooms which don’t yet have any, but knowledgeable builders will want to dig up the foundations and replace them with new ones capable of taking the weight resting on them. Again, theory encodes knowledge, but its messages remain garbled without the right key words. As a [knowledge] builder I’ve been involved with many types of foundation over the years, but having chanced on ones which would work, am now one of those experiencing the “dissing”.

I understand why those living in our house may fear their lives being disrupted by rebuilding, but most of the rebuilding needed is in the theory, with the day-to-day practical effects on the household of my proposed solution (negative value money in theory and a credit card economy in practice) being minimal, though opening up possibilities for “open plan living”.

As the householders don’t want to know, these recommendations are therefore directed to those who already understand the problem. Stop complaining about the cracks, check out for yourself what the builder is advising, then – as residents – encourage the householders to mandate the changes by adding to his little voice the weight of your own experience.

This post and much of the discussion that follows illustrates the points I’ve made all along. Alfred Marshall back in 1890 said this, “Political Economy or Economics is a study of man’s actions in the ordinary business of life; it inquires how he gets his income and how he uses it. Thus it is on the one side a study of wealth, and on the other, the more important side, a part of the study of man. For man’s character has been molded by his every-day work, and by the material resources which he thereby processes, more than by any other influence unless it be that of religious ideals; and the two great forming agencies of the world’s history have been the religious and the economic.” Talk about chutzpah. The “ordinary business of life” involves the cultural, political, family/clan, religious, conflict of all sorts, literature, philosophy, work, and the economic. But to conclude from this list that economics is one of the two great forming agencies of humanity’s life on Earth is hubris of the worst sort. Humans go to war over resources needed for their survival. Pray about such resources. Create political structures to find and exploit such resources. Sacrifice family and clan members for these resources. Teach the new generations about these resources. Write poems about these resources. If we accept Marshall’s words we must believe that Political Economy/Economics somehow can capture all this in one framework. Absurd! But Marshall is a bit less off target when he says Political Economy/Economics studies the actions of humans in acquiring and using income (e.g., wealth). Economics today seems to have reversed Marshall’s definition. “Political Economy/Economics is the instruction and direction of humans by Economists in the proper ways to acquire and use income/wealth.” And the level of hubris by Economists just keeps growing. Marshall’s hubris in 1890 was of little concern, since Economics had little influence on world events. That is no longer the case today. Economics has major influence on events and policies today. Much if not most of that influence negative in the last 40 years. Thus my contention that the best course is just to shut down Economics entirely.

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